Incremental Progress At Nektar Therapeutics

With the shares up about 30% from the time of my last article, I can't complain about how Nektar Therapeutics (NASDAQ:NKTR) has been performing. While an improvement in sentiment on biotech stocks in general certainly hasn't hurt, I also think Nektar is benefiting from signs of life in the Movantik business, a clever deal that may revive a cancer drug's commercial potential, and growing optimism about an early-stage pipeline asset in cancer.

Between the passage of time, the deal with Daiichi Sankyo, and a little more optimism about NKTR-214, I've added about $3 to my fair value (with the simple passage of time accounting for about half of that). With that, I'd say these shares still hold some appeal.

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Incremental Progress At Nektar Therapeutics

Seeking Alpha: ArQule Dips, But Not Necessarily A Bargain

There are really only two reliable catalysts for biotech stocks - reporting clinical data and announcing equity offerings - and the latter one is seldom a positive for the stock. With ArQule (ARQL) looking to increase its sharecount by more than 11% (including the shoe), Tuesday's 12% decline on another red day in the market doesn't seem so out of line. Even with the pullback though, it's not blatantly clear to me that this is a must-own biotech.

Queuing Up For Tivantinib Data
Far and away the most valuable asset for ArQule is its Phase III drug tivantinib - a c-Met receptor tyrosine kinase inhibitor. C-Met is a popular target these days, with companies including Roche (RHHBY.PK), AVEO (AVEO), Amgen (AMGN), Bristol-Myers (BMY), and Exelixis (EXEL) all developing drugs with this target in mind.

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ArQule Dips, But Not Necessarily A Bargain

Avandia Gets A Reprieve?

Apparently the expert panel commissioned by the FDA to evaluate GlaxoSmithKline's (NYSE: GSK) now-controversial diabetes drug Avandia has voted to recommend that the drug stay on the market. The vote, 20-12, is not binding and although the FDA usually does as its panels recommend, they do not always do so - particularly in cases of safety concerns.

As a brief background, Avandia (also known as rosiglitazone), is a gamma PPAR diabetes drug that makes cells more responsive to insulin. Although it is quite effective (reducing HbA1C by 0.5% or more, a nearly 10% improvement in this important diabetes diagnostic marker), some studies have indicated it carries a much higher risk of heart attack and death from cardiac problems than other gamma PPARs or other anti-diabetes drugs in general. The issue has grown with time, precipitating this FDA meeting.

Although Avandia may be allowed to stay on the market, its glory days are almost certainly over. Actos, a rival PPAR drug marketed by Takeda does not seem to have the same risks. Moreover, this whole class has been a sort of pharmaceutical Bermuda Triangle - AstraZeneca, Bristol Myers Squibb, and Daiichi Sankyo have all had serious issues with PPAR drugs they tried to develop, and relatively few compounds are in clinical studies now.

Moreover, there are plenty of other fish in the sea - including GLP-1 analogs (Amylin, Lilly, Roche, Novo Nordisk,  and Glaxo) and DPP-4 inhibitors (Merck) on the market or in late development. Plus, very old drugs like metformin are still reasonably effective and have positive risk-benefit trade-offs.

I am a little surprised to see this result, but as I said, I do not think it will matter too much. Even if the FDA allows the drug to stay on the market, Glaxo is going to have a helluva time driving prescription growth. In the meantime, I have a vested interest here in hoping that Amylin's long-acting GLP-1 analog Bydureon steals the show.

Disclosure - I own shares of Amylin

Brief update: Of the 20 who voted NOT to remove Avandia, 10 want sells restricted and stronger warning labels, 7 want stronger labels but no new restrictions, and three recommended no changes. This breakdown makes me think that further restrictions (at a minimum) are a near-certainty and total withdrawal could still happen.